Mortgage Size

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<div>Australia's largest mortgage aggregator Australian Finance Group (AFG) reported in its Mortgage Index that year-on-year total quarterly mortgage volumes increased by +8 percent to a record $15.19 billion.</div>
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<div>The index is not seasonally adjusted. </div>
<p><a href="Australia's%20largest%20mortgage%20aggregator%20Australian%20Finance%20Group%20(AFG)%20reported%20in%20its%20Mortgage%20Index%20that%20year-on-year%20total%20quarterly%20mortgage%20volumes%20increased%20by%20+8%20percent%20to%20a%20record%20%2415.19%20billion.%20The%20index%20is%20not%20seasonally%20adjusted.%20" target="_blank">Click to enlarge</a><br><img src="/images/2016/10/10/AFG4.jpg" alt=""><br><br></p>
<div>Since the standard variable home loan rate fell below 7 percent in Australia in the September 2012 quarter, the average mortgage size has increased by +$90,000 or +23 percent. </div>
<p><a href="/images/2016/10/10/AFG2.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/10/10/AFG2.jpg" alt=""></p>
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<div>Investor market share ticked back to 32 percent in the quarter - well down from the 2015 peak of 40 per cent - in part due to more restrictive lending criteria, combined with widespread fears of an apartment oversupply. </div>
<p><a href="/images/2016/10/10/AFG5.jpg" target="_blank">Click to enlarge</a><br><img src="/images/2016/10/10/AFG5.jpg" alt=""></p>
<div>According to AFG the lift in mortgage volumes was largely driven by homeowners looking to save, with refinancers accounting for 38 percent of activity, up from 36 percent in the prior year comparative quarter. AFG noted that home loans are widely available from below 4 percent. </div>
<p><strong><span style="text-decoration: underline;">State versus state</span></strong><br><br></p>
<div>At the state level the average mortgage size hit new highs in New South Wales ($597,656) and Queensland ($400,566). South Australia also notched a fresh high average mortgage size of $379,405. Elsewhere average mortgage sizes were either at or below previous peaks. </div>
<p><a href="/images/2016/10/10/AFG1.jpg" target="_blank">Click to enlarge</a></p>
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<div>Quarterly mortgage lodgement volumes hit record highs in each of the three most populous states plus South Australia, offset by declines in Western Australia and the Northern Territory. </div>
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<div>Victoria continues to defy gloomy predictions with heady levels of buyer activity, while Queensland also recorded an very large year-on-year uplift, even after accounting for possible shifts in AFG's market share. </div>
<p><a href="/images/2016/10/10/AFG6.jpg" target="_blank">Click to enlarge</a></p>
<div class="separator"><img src="/images/2016/10/10/AFG6.jpg" alt=""></div>
<p><br><strong><span style="text-decoration: underline;">The wrap</span></strong> </p>
<div>The AFG figures are always well worth a read given their materiality.<br><br>The headline result was very strong, but it does need to be recognised that a significant volume of mortgage finance presently relates to refinancing in the prevailing low interest rate environment.<br><br>These data suggest to me that interstate buyers are likely to see better results in Queensland than elsewhere, at least initially (for the right property type, at any rate, which does not mean high-rise apartments). The economy of Western Australia remains in recession, and as a result Perth may not come on to the radar of interstate buyers until 2018. </div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

Average mortgage size hits new high: Pete Wargent

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<p class="post-title entry-title">EXPERT OBSERVER</p>
<p class="post-title entry-title">In July I noted via a stylised example how the lifting of the minimum 7 per cent mortgage assessment rate - when combined with the monetary easing then priced in - might result in a 15 per cent increase in borrowing power and activity for homebuyers (but not portfolio investors).</p>
<p class="post-title entry-title"><img src="https://1.bp.blogspot.com/-KEtYgTcCfQM/XkjtNvUsVZI/AAAAAAAA0SA/Czq_5rwV_h82_Ngssm_oXQTeFvkfSoSDQCNcBGAsYHQ/s640/Floor%2Brate.jpg" width="640" height="362" data-original-height="781" data-original-width="1374"></p>
<p class="post-title entry-title">This is pretty much what's played out, with investor credit growth running at the lowest level on record and mired in negative territory, while homebuyers have come back into the market with gusto.</p>
<p class="post-title entry-title">As written about previously, Australian Finance Group (AFG) saw a $35,000 jump in the average loan size across two quarters of its lodgements data, largely driven by upwards moves in New South Wales and Victoria. </p>
<p class="post-title entry-title"><img src="https://1.bp.blogspot.com/-V8SmCTvSiEs/Xkjtr_mT5cI/AAAAAAAA0SI/Zt8nDkOXZi46E3lgW-lGDhuzBGkxTfCbgCNcBGAsYHQ/s640/AFG1.jpg" width="640" height="378" data-original-height="808" data-original-width="1365"></p>
<p class="post-title entry-title">And now the December 2019 housing lending figures from the ABS showed the average new mortgage size for homebuyers rising to around $500,000 for the first time, recording a surprising 16 per cent or $60,000 leap since the election.</p>
<p class="post-title entry-title"><img src="https://1.bp.blogspot.com/-khQfprIuT6c/XkkKzxewRWI/AAAAAAAA0SY/J_cQf-ufv68_eb_EJYcfvmI9nVWxun6igCNcBGAsYHQ/s640/Loan.jpg" width="640" height="394" data-original-height="820" data-original-width="1330"></p>
<p class="post-title entry-title">The increase here was again driven by New South Wales and Victoria, and to a secondary extent the other mainland states.</p>
<p class="post-title entry-title">While it may be a noisy data series, in NSW the average mortgage size surged by $103,000 or 20 per cent since May for the purchase of existing homes. </p>
<p class="post-title entry-title"><img src="https://1.bp.blogspot.com/-gk7f-c9iGqQ/XkkOnT5X1EI/AAAAAAAA0Sg/loFPwgv9gWYzZ9S4lSCe_Jj_nCmbHsqXQCNcBGAsYHQ/s640/AMS.jpg" width="640" height="374" data-original-height="831" data-original-width="1418"></p>
<p class="post-title entry-title">With this week's wage price index likely to record year-on-year growth of just +2.3 per cent there probably isn't much more gas in the tank here until the economy gets moving again, which doesn't look likely any time soon. </p>
<p class="post-title entry-title"><strong>PETE WARGENT</strong><em> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em></p>
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The average new mortgage size has increased to nearly $500,000: Pete Wargent

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<p>EXPERT OBSERVER</p>
<p>The latest ABS data on new housing credit showed a sharp rise in the value of home loan commitments, driven by a surge in owner occupier lending as well as a smaller rise in investment lending.</p>
<p>The rise in the value of owner occupier housing finance commitments over the September quarter (+12.1%) was the fastest quarter-on-quarter gain since the September quarter of 2015 (13.7%), taking the value of new owner occupier home loan commitments 17.3% higher since bottoming out in May earlier this year.</p>
<p>Growth in investment lending hasn’t been quite as strong, however the value of investment loan commitments was up 6.0% over the September quarter, which was the fastest gain since the December quarter of 2016.</p>
<p>The value of investment loan commitments is now 8.4% higher than the May 2019 trough.</p>
<p>With owner occupier credit outpacing investment credit, investors now comprise the lowest portion of housing loan commitments since the ABS records commence in 2003, currently tracking at 24.8% of the value of new mortgage commitments.</p>
<p>In contrast, shortly after the first round of macro-prudential rules were introduced in December 2014, investors comprised 43% of national mortgage demand. The trends in housing credit are similar across the states, with the value of owner occupier loan commitments generally outpacing investors.</p>
<p><em>Click <a href="https://www.propertyobserver.com.au/images/2019/11/14/Mortgage%20volumes%201.JPG" target="_blank">here</a> to enlarge.</em></p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%201.JPG" alt=""></p>
<p>New South Wales The value of owner occupier loan commitments was up 12.3% over the September quarter, compared with a 3.3% rise in investment.</p>
<p>Although investment credit growth is slower, NSW has the largest concentration of investment activity across the states, with investors comprising 30.5% of mortgage demand based on value.</p>
<p>First home buyers have surged higher over the past couple of years, as stamp duty exemptions and lower housing values have encouraged first timers back into the market.</p>
<p>First home buyers have comprised more than 25% of owner occupier mortgage demand since March this year, more than double the proportion of first home buyers prior to the market peak.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%202.JPG" alt=""></p>
<p>Victoria The value of owner occupier home loan commitments was 11.3% higher over the September quarter, compared with a 10.6% lift in investment lending.</p>
<p>Non-first home buyers drove the quarterly gains, with the value of loans up 13.4%, compared with a 9.2% rise in first home buyer lending.</p>
<p>The value of investor loan commitments remains almost 9% below the level a year ago, however Victoria is showing the second largest concentration of investors (after NSW), comprising 25.2% of mortgage demand in September.</p>
<p>First home buyers have been holding above 30% of owner occupier mortgage demand since February this year.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%203.JPG" alt=""></p>
<p>Queensland Investors are driving the largest increases in the value of mortgage activity, with the value of investor loans up 12.5% over the September quarter, compared with a 8.4% lift in owner occupier lending.</p>
<p>Despite the larger rise in investment lending, investors comprise only 17.9% of mortgage demand across Queensland, the second lowest proportion across the states (after WA).</p>
<p>First home buyers showed a larger lift in the value of lending over the quarter, up 11.1% compared with a 8.4% increase in the value of non-first home buyer loans.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%204.JPG" alt=""></p>
<p>South Australia Non-first home buyers are driving mortgage demand across South Australia, with the value of mortgage commitments up 10.8% over the September quarter, compared with a relatively flat 0.8% lift in first home buyer lending and a 1.3% increase in investment lending.</p>
<p>First home buyers have seen a stronger result over the past year, with the value of loans up 9.4%.</p>
<p>The September data showed investors comprised 21.9% of mortgage demand, which was well below the decade average of 29.9%.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%205.JPG" alt=""></p>
<p>Western Australia Mortgage activity is finally showing an upwards trend across Western Australia, with the value of owner occupier lending up 15.8% over the September quarter, while the value of investor loans surged 24.1% higher.</p>
<p>The quarterly result was the strongest gain for owner occupier lending since 2009 and the surge in the value of investment loans was the highest since 2005.</p>
<p>Mortgage lending is rising from a very low base, especially across the investor segment, after a prolonged period of weak credit growth.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%206.JPG" alt=""></p>
<p> Tasmania Mortgage lending was positive on an annual basis across each of the broad market segments, driven by a surge in investment lending over the quarter (+32.4%) and a less substantial 26.2% lift in the value of owner occupier loans.</p>
<p>Tasmania was the only state to record an annual lift in the value of mortgage commitments across each of the broad market segments.</p>
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<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%207.JPG" alt=""></p>
<p>Northern Territory The value of mortgages was down over the quarter and over the year across each of the broad market segments.</p>
<p>Over the past year, investor mortgage commitments were down the most (-30.5%), with a large fall across the first home buyer segment as well (-29.7%).</p>
<p>With housing values around 31% below their peak across the NT, first home buyers are taking advantage of very healthy levels of housing affordability, showing the highest concentration of any State or Territory across the NT, comprising 38.2% of owner occupier demand based on the value of new commitments.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%208.JPG" alt=""></p>
<p>Australian Capital Territory The value of owner occupier mortgage commitments was up 20.7% over the September quarter, driven by a surge in first home buyer activity where the value of lending jumped 75% higher.</p>
<p>The value of mortgage lending across the larger non-first home buyer sector of the market was up 10.3% and investment lending was 9.5% higher over the quarter.</p>
<p>The rebound in new housing credit flows is running in parallel with increased buyer activity and rising residential property values.</p>
<p><img src="https://www.urban.com.au/images/2019/11/14/Mortgage%20volumes%209.JPG" alt=""></p>
<p>According to CoreLogic’s Home Value Index, national dwelling values bottomed out in June this year, the same month that housing credit started to rise.</p>
<p>The improved credit flows have been supported by APRA’s decision to relax borrower serviceability rules, as well as the lowest mortgage rates since at least the 1950’s.</p>
<p>The flow of new credit is likely to be a key factor monitored by policy makers.</p>
<p>Any sign of a material rise in speculative buying activity, higher household debt or a slip in lending standards could be met by another round of macroprudential credit tightening, however at the moment, despite the recent surge in housing credit, investors remains underrepresented in the market and overall credit growth (based on the RBA credit aggregates) remains subdued, implying a strong focus on debt reduction from households.</p>
<p>The next round of APRA statistics providing an insight into key metrics covering riskier areas of lending such as the proportion of interest only loans and the proportion of high LVR lending is due out next month.</p>
<p>These statistics should provide some further guidance around any regulatory response that could impact on housing credit activity.</p>
<p><em><strong>TIM LAWLESS</strong> is the CoreLogic head of research.</em></p>
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